Treasuries outlook: yields fall as Trump adopts populist over fiscal, tone

US Treasury yields fell from two-and-a-half-week highs on Friday after Donald Trump adopted a populist tone as he was sworn in as US president, raising some concerns that fiscal stimulus efforts may be delayed. Trump pledged to pursue "America First" policies in an inaugural address that was a populist, anti-Washington rallying cry.
"When he got a little more anti-establishment you could see the yields dropping a little bit," said Aaron Kohli, an interest rate strategist at BMO Capital Markets in New York.
"To some extent the market sees his honeymoon period where he has license to help get more legislation passed as fairly brief, and the risk is that if he diverts conversation to more populist topics that the market will have a harder time believing that he will get a lot of the other stuff, the fiscal policy, the stimulus, the infrastructure, passed as well," Kohli said.
Investors have bet that Trump will boost infrastructure to grow the economy.
New Treasury supply to finance any new government spending is also likely, which may further drag on bonds and send yields higher.
"Clients believe that what you are going to see down the road is more supply by this administration," said Tom di Galoma, managing director at Seaport Global in New York.
Benchmark 10-year notes fell 3/32 in price to yield 2.47 percent, after earlier rising to 2.51 percent, the highest since January 3. The yields have jumped from a low of 2.31 percent on Tuesday.
Bond prices had tumbled since a speech by Federal Reserve Chair Janet Yellen on Wednesday was viewed by some investors as more hawkish than expected. "Waiting too long to begin moving toward the neutral rate could risk a nasty surprise down the road - either too much inflation, financial instability, or both," Yellen said.
"The thing that got the ball rolling on it was an interpretation by some that Yellen was a little bit more hawkish," said Lou Brien, a market strategist at DRW Trading in Chicago. Brien noted, however, that Yellen has made similar comments in speeches over the past few years. Comments by Yellen late on Thursday were viewed by the market as more dovish.
Expectations of heavy corporate supply next week also weighed on the market. The Treasury Department will also sell $88 billion next week in two-, five- and seven-year notes.